Will BRICS surpass the US in global oil production?
The Future of Global Energy Markets: BRICS and Beyond
After the coalition of emerging market economies, better known as BRICS (Brazil, Russia, India, China, and South Africa), added six more members to the bloc, including Saudi Arabia, the debate in the summit fallout has concentrated on the future of the U.S. dollar. But what about global energy markets?
Over the past year, BRICS nations have accelerated their de-dollarization efforts by abandoning the greenback in bilateral trade and settling in local currencies, be it the Chinese yuan or the Brazilian real.
At the 15th annual summit in Johannesburg, South Africa, officials confirmed that a working group has been established to assess the creation of a new BRICS reserve currency.
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In the meantime, the group plans to rely more on national currencies.
With the buck accounting for most international trade, experts concur that dethroning the king dollar will be a slow process. The same sentiment might not be accurate for worldwide crude oil production.
Overnight, BRICS transformed into an energy powerhouse with the addition of three major oil producers.
It is projected that the coalition’s share of global crude production will reach 43 percent, driven primarily by Saudi Arabia (12.9 percent), Russia (11.9 percent), the United Arab Emirates (4.3 percent), and Iran (4.1 percent).
The organization will also control a vast portion of global oil reserves.
It is estimated that the reformed BRICS will possess approximately 700 billion barrels of crude stockpiles, led by Saudi Arabia (297.5 billion barrels), Iran (157.8 billion barrels), Russia (107.8 billion barrels), and the UAE (97.8 billion barrels).
During the summit, South African President Cyril Ramaphosa confirmed that BRICS will be looking at expanding its partnership, which market observers say could include Venezuela.
Should Caracas join the mix, the entity’s control of international oil supplies could top 65 percent.
By comparison, the Group of Seven (G7) economies control about 4 percent of proven reserves.
Geopolitical experts have purported that the BRICS expansion is a big strategic success for China and India since they are the world’s largest oil importers.
New Delhi imports more than 80 percent of its energy needs, while Beijing’s crude imports climbed 12 percent year-over-year in the first seven months of the year.
Others do not believe this will seriously alter current conditions in international oil energy markets, especially since many of the new members are a part of the Organization of the Petroleum Exporting Countries (OPEC).
“I don’t think this has implications on oil production since the three new members with meaningful oil production are already members of OPEC, which will supersede BRICS in matters of oil output,” Matt Sallee, the president of Tortoise Energy Infrastructure Corp., told The Epoch Times.
At the same time, the de-dollarization campaign and the state of energy markets could collide.
Since more countries are engaging in non-dollar bilateral trade, some experts wonder if BRICS nations and BRICS+ allies could eventually request that the United States and Europe settle oil trades in local currencies, like the UAE dirham or Saudi riyal.
Such a move, political observers argue, could result in a paradigm shift since the greenback has accounted for about 80 percent of crude oil transactions over the past few decades.
State of American Energy
Meanwhile, the U.S. maintains approximately 44.4 billion barrels in proven oil reserves, excluding the Strategic Petroleum Reserve, which stands north of 300 million barrels.
In addition, for nearly all of 2023, daily output has been flat, ranging between 12.2 million barrels per day (bpd) and 12.4 million bpd.
On a global basis, proven worldwide oil reserves stand at about 1.65 trillion barrels, and daily output is roughly 100 million bpd.
“The BRICS conference shows that in some ways it’s a new bloc that could challenge the United States for energy security,” wrote Phil Flynn, the senior market analyst at PRICE Group Futures, in a note.
Indeed, there has been widespread concern that domestic output could be slowing heading into 2024. Despite a barrel of West Texas Intermediate (WTI) trading in the $80 range, production growth has been flat for most of 2023 and below-trend compared to before the coronavirus pandemic.
According to the Baker Hughes Oil Rig Count, the number of active drilling rigs fell to 512 for the week ending on Aug. 25, down from 520 in the previous week. This measurement has failed to recover to levels seen before the COVID-19 public health crisis and stands at the lowest reading since Feb. 2020.
Enverus Intelligence Research (EIR) recently published a report that warned production growth will be “more difficult than it was in the past.”
“The U.S. shale industry has been massively successful, roughly doubling the production out of the average oil well over the last decade, but that trend has slowed in recent years,” said Dane Gregoris, report author and managing director at EIR.
“In addition, we’ve observed that declines curves, meaning the rate at which production falls over time, are getting steeper as well density increases. Summed up, the industry’s treadmill is speeding up and this will make production growth more difficult than it was in the past.”
The Energy Information Administration (EIA) warned earlier this month that crude oil and natural gas output from top shale-producing regions is poised to slide in September for the second consecutive month to the lowest levels since May.
EIA data suggest that shale oil production in top-producing areas, including in the Permian Basin and South Texas Eagle Ford, will drop to 9.41 million bpd next month.
It is not only the United States that may witness a trim in production in certain areas. Saudi Arabia, Russia, and OPEC members have eased outp
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